Editorial: We should help students achieve their dreams, and keep them paying

Tuesday

Jul 11, 2017 at 12:01 AM

If you are a college student or graduate in or from Polk County, or the parent of one, or the parent of a newly graduated high-schooler headed off to college this fall, you might find a poll released last week interesting. We certainly did.

LendEDU, a group that tracks the student loan industry, found Millennials — generally, adults 35 and under — believe by a 70-30 margin that student loan debt is a bigger threat to the U.S. than North Korea.

Interestingly, despite all of the wailing and hand-wringing that followed President Donald Trump’s withdrawal of the U.S. from the Paris climate accord, just 51.5 percent of those polled identified climate change as a bigger problem confronting America than student loan debt. That response is surprising, considering that nine of every 10 Millennials believe climate change is real and occurring now.

The data suggest they are right to think this is a very real economic problem for our nation.

LendEDU observes that 60 percent of college students graduate owing some debt — on average, about $28,400. Perhaps most troubling is the repayment rate. LendEDU says 11.8 percent of federal student loans are 90 days late or in default — far surpassing, for instance, the ratio for home loans (4 percent) or car loans (1.4 percent).

We might be tempted to attribute the poll results to the Millennials’ infamous narcissism: They see it twice as bad as potential nuclear Armageddon or running even with the climate meltdown because it’s happening to them.

But Millennials cannot be blamed entirely for this situation, and perhaps we shouldn’t be stunned by the amassed amount of student debt.

In large part the issue reflects the value our society has placed on obtaining a college education, as well as the debt-driven nature of our contemporary economy.

Unfortunately, most students must dive into debt to obtain a degree. And students seeking professional degrees, such as from law or medical schools, must take on much more debt than other graduates. And we get that the job market remains tight, often forcing graduates to take menial employment.

But student debt remains a small fraction of consumer indebtedness relative to the mountain of mortgage debt — $10.6 trillion — that Americans racked up at the height of the Great Recession. On average, the debt facing a new college graduate is $5,000 less than the price of the typical new car sold in the U.S. — with much lower monthly payments.

Thus, it seems for many graduates, this is a manageable problem.

However it occurred, though, the last thing we need is an overreaction, by which we refer to ideas such as the loan forgiveness program advocated by Vermont Sen. Bernie Sanders and others. That sounds nice, but is really misguided. Ninety-five percent of all student-loan borrowers are indebted to the federal government, meaning a forgiveness program would socialize the loss across all taxpayers. As we saw during the recession, that would stimulate a perverse mode of thought that encourages imprudence or an evasion of responsibility in the hope of a government bailout.

Florida Democratic Sen. Bill Nelson has offered a potential fix.

On Monday, Nelson filed a bill that caps the interest rate for new student loans at 4 percent, which is lower than the 4.45 percent that the rate climbed to on July 1. (Each July 1 the government sets the rate for the new academic year, and it lasts the life of the loan.)

Nelson’s measure also allows borrowers with rates above 4 percent — the rate is likely closer to 7 percent if the loan was approved before July 1, 2013 — to refinance, which is now prohibited. Nelson’s proposal also ends loan origination fees, which take a $400 bite out of front end of the loan.

On the Senate floor on Monday, Nelson argued the prospect of repaying a large student loan is preventing some people from buying homes or starting a business, or causing them to rethink college altogether.

"That's not in anybody's interest — not the students, not the families, not the communities and it's certainly not in the country's best interest," he said.

His idea is well worth considering. It attempts to make college more affordable while ensuring people with loans keep paying.

In the real world, climbing student loan debt isn't as fearful as a nuclear warhead hitting Honolulu or the demise of Antarctica. Yet the system should be reformed, and Nelson at least has started the conversation.

Correction: An opinion column in Friday’s Ledger identified Dr. Berney Wilkinson, including using his photo, as the author. Dr. Wilkinson, who is a Ledger columnist, was not the author. It was written by Francis Wilkinson of Bloomberg News, as noted at the end of the column.